Credit Card Pros

Reason 1: Enjoy rewards

With every dollar spent, you earn what is known as reward points. This is a perk given to you by the bank of financial institution that issues the card.

Earned reward points can be redeemed for gifts, vouchers or further discounts on goods and services.

For the prudent spender, this is a great way to stretch your dollar further.

Reason 2: Peace of mind with buyer and fraud protection

Here's another credit card benefit that's frequently overlooked.

When you use your credit card to pay for goods and services, the money isn't deducted immediately from your bank account. In fact, the credit card company has no direct access to your accounts.

You get to immediately enjoy the goods or services that you've procured, but what's more important is that if the merchant doesn't keep their end of the bargain (say they gave you defective goods or they overcharge you), you can instruct the credit card company to charge back the expense item to the merchant.

In other words, you don't have to pay for goods and services which you did not receive.

Reason 3: Get insured

Issuers such as American Express even offer insurance cover that rides on your credit or charge card. You get travel insurance that covers events such as lost baggage or disaster situations, and even insurance that covers stolen or broken goods.

Debit cards don't offer any form of insurance. If you're a frequent traveler or flyer, take a serious look into what credit and charge cards offer.

Reason 4: A convenient financial management tool

Many have associated credit cards with individuals who lack financial management knowledge.

For the careful spender, however, credit cards bring two strong advantages:

• The monthly statements show, in one place, all the purchases you've made. Many issuers now allow you to download an electronic file containing the statement transactions which can then be integrated with your financial management tool such as Quicken or Microsoft Money.
• You just need to issue one payment check or funds transfer to settle the expenses, and this can be done at the due date of the next billing cycle. You could, for instance, schedule payment of an expensive item at the beginning of the month, and pay only at the end of the next month. Compared to another shopper who paid for the same item with cash or a debit or ATM card, you earn interest on the funds in your savings account (that would otherwise have been used to finance the purchase now).

Talking a bit more on the benefit of being able to delay your credit card payment, here's what I usually do with my credit cards (I have both Visa and MasterCard) issued by Citibank.

The billing cycle (or statement date) of my cards occur around the middle of the month, say on the 15th. So I try to schedule large purchases to occur immediately after the 15th. I see this purchase on the 15th of the next month, and Citibank allows 15 days before the payment is due. This means that I have approximately 1.5 months from the time I make the purchase until I need to pay for it.

The case for getting a debit card

Credit card applicants are sometimes turned down by the issuer. I've experienced this myself. Reasons given could range from the applicant having a bad credit history, or not being able to show a credible source of income. In my case, it was because I didn't have a fixed job at the time.

If you can't get approval for a credit card, the next best thing is a debit card. Cards in general offer a world of convenience, and you needn't carry a lot of cash with you all the time.

You might also want to consider applying for a debit card if you know that you have a tendency to overspend. Debit cards help you to enfore financial discipline.

Generally though, I'd advise against getting a debit card. Read two Pirg.org articles which explain why how you expose yourself to possibly high libilities when you use signature-based debit cards as opposed to credit cards or old-fashioned PIN-based ATM cards.

Conclusion

I strongly recommend getting a credit card if you're able to. I personally use credit cards for more than 99% of transactions - I even use it to pay for purchases over the internet, and I log in to my issuer's service to pay my utility, membership and assessment fees online.

I always strive to PIF (pay in full) the outstanding amount in order not incur finance and interest charges. I get to enjoy payment convenience and the gifts I'm able to redeem with my reward points.

Cards with stringent terms
With cards like the Capital One MasterCard, you'd probably have to live with very low credit limits, high annual fees (approximately $60) and high interest rates (24% per annum). Many do still apply for these cards though, especially those with credit scores below 500, as approval is quite certain, and is an extremely useful financial tool to re-build and re-establish one's credit.
Many have reported that Chase One's sub prime cards are not worth getting, because even if you make your payments on time, Chase does not have a policy of recognizing your "good payment behavior" and promote you to their prime cards. They're also notorious for charging high annual fees and APRs (annual percentage rate) with these cards, and the customer service representatives are extremely reluctant to act on credit limit increase requests.

Catalog credit cards
These cards are typically sought after by those who have adverse, bad or damaged credit history. The limitation imposed is that you can only use the card to make purchases of merchandise from a certain store. However, you're almost guaranteed to get your application approved.

Credit card horror stories
Well, it doesn't have to be one. Click here to read how Medion managed to get BBB (Better Business Bureau) to take on his case with unauthorized charges appearing in his credit card (which he ultimately canceled).

Stacy Johnson's advise for applicants with bad credit
In this video, Stacy Johnson reveals the exorbitant charges imposed by First Bank of Delaware on holders of the Contentinal Finance MasterCard. This card would seem to be a likely choice for those with less than ideal credit scores, but the total fees one owes the bank before the card even arrives in the mail comes up to a ridiculous $247, which is just $53 shy of going over the meager $300 credit limit.

To add to the insult, if you're good with your monthly payments, they increase your credit limit a measly $100 at a time, and charge you $25 each time they do it!
Definitely, follow Stacy's advice to stay away from this card (and other cards like it), shop around and don't forget to read the fine print - ALWAYS.

My favorite card?
OK, you didn't ask, but my personal favorite is the Blue Sky from American Express, and these are some of the highlight benefits offered:

• No annual fee
• Frequent flyer miles can be applied to other travel related expenses, and not just for air tickets. This is convenient as I travel a lot, and sometimes have to hop on multiple modes of transport, so the Blue Sky card allows me to enjoy reduced rates on cruise line tickets, hotels worldwide and car rentals.
• A multitude of insurance cover and buyer protection is offered. American Express is pretty comprehensive, and you get cover for lost luggage and travel accidents
• No restrictions on choice of airline, seats and other travel arrangements. This is the biggest plus point with the AMEX Blue Sky - almost every other credit cards impose severe restrictions on travel-related redemptions and thus virtually negates the travel benefits that you got the card for in the first place.

Conclusion

We all have our blacklist of credit card issuers, but each of them does have their own benefits that are in line with our needs and requirements, as long as we make sure the disadvantages are not deal breakers.